State Street, UBS Are in Talks to Merge Asset-Management Businesses


State Street Corp.

STT 1.49%


UBS Group AG

UBS -1.41%

are in talks to merge their asset-management businesses, according to people familiar with the matter.

The firms have held discussions since early 2020, and by this summer appeared close to an agreement, the people said. It is unclear why a deal didn’t materialize at that time, but the two sides remained in touch.

State Street had hired

Goldman Sachs Group Inc.

GS -1.80%

to review the options for its investing business, called State Street Global Advisors, the people said.

As the firm weighed those options, State Street executives concluded the business needed to get bigger to remain competitive.

Buying a rival, however, wouldn’t be easy. Capital rules regarding large U.S. banks limit how much State Street could spend, as would its own stockholders’ initial reaction to its 2018 acquisition of Charles River Systems Inc. The bank’s shares had tumbled on the news of that deal. Pursuing a joint venture with another firm emerged as the preferred path forward, the executives believed, and State Street reached out to several potential partners, including UBS.

State Street’s plan drew interest from UBS, reviving discussions the two banks held nearly a decade earlier. The banks weighed a similar tie-up in 2012, when many financial firms looked to deals to help accelerate their recoveries from the 2008-09 financial crisis.

For a time, an agreement this year seemed likely. State Street and UBS had settled on roles for some of the venture’s top executives and were considering names for the new stand-alone manager, the people said.

State Street’s decision to weigh options for its asset-management business, including a merger with UBS or another rival, was reported earlier by Bloomberg News. State Street’s shares rose 1.5% to $72.80 on Friday after the report.

State Street Global Advisors manages more than $3 trillion and remains a leading seller of exchange-traded funds, the low-cost investing structure the firm had pioneered. But the same forces that State Street’s ETFs helped unleash—the digitization of a hidebound industry accustomed to thick profit margins—have now dropped the cost of many investing services to zero or close to it and forced money managers and brokers to cut expenses severely.

Those challenges have led many financial firms, from

Franklin Resources Inc.


Invesco Ltd.


Morgan Stanley,

Charles Schwab Corp.


JPMorgan Chase

& Co., to beef up their asset and wealth management businesses through acquisitions.

Write to Justin Baer at [email protected]

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